Genting Singapore - Solid Set Of Results - Upgrade To BUY
- Earnings beat expectations.
- 4Q16 adj. EBITDA jumps 29% YoY.
- Higher S$1.17 FV estimate.
Healthy set of FY16 results beat expectations
- 4Q16 net profit attributable to ordinary shareholders improved to S$159.2m versus a S$7.8m loss in 4Q15 while adjusted EBITDA in 4Q16 increased 29% YoY to S$233.7m.
- In terms of the topline, 4Q16 revenues grew 2% YoY to S$557.7m from S$547.4m in 4Q15.
- The improvement in profitability over the quarter was mainly a result of higher rolling win percentage in the premium player business and GEN’s revised strategy to focus on better margin businesses.
- On a full year basis, FY16 net profit attributable to ordinary shareholders more than doubled to S$266.3m as RWS attractions enjoyed a daily average visitation of ~18,000 while the hotel business clocked a high occupancy rate of 92%.
- We judge these strong set of results to be above expectations as adjusted EBITDA form 116% of our forecast.
- A final dividend of 1.5 S-cents per share was proposed; this brings total FY16 dividends to 3.0 S-cents (versus 1.5 S-cents in FY15).
Sharp execution and firmer outlook; Upgrade to BUY
- We are encouraged by the reduction in impairment of receivables relating to VIP gaming since the group calibrated its credit policies and commission structure. Furthermore, we highlight management’s optimism on delivering sustainable earnings growth and their marketing focus on growing regional premium mass business.
- Investors should also note that the group’s disposal of its 50% equity interest in an associate, Landing Jeju Development, in Jan 2017 will likely be reflected as a gain on disposal of ~$96.3m in the 1Q17 results.
- In our view, the management team has executed strongly by spearheading initiatives to maintain their competitive advantage in a challenging environment – for instance, The Maritime Experiential Museum is scheduled to undergo a complete renovation and is set to re-open with all-new content in end 2017, while this year’s Art at Curate series will feature a new concept with a lineup of Michelin starred chefs.
- After adjusting our valuation model to reflect the latest earnings beat and a firmer operational outlook, our fair value estimate increases from S$0.88 to S$1.17.
- Upgrade to BUY.